INVESTMENT OUTLOOK

11.2015

After a brutal third quarter, markets calmed
noticeably in October. So far it has paid off to hold on to risky assets or
even more to buy on dips. Markets took a certain comfort both from the fact
that Chinese officials intervened by implementing monetary and fiscal measures
and also from the somewhat better economic data. In addition, the Fed came out
with dovish rhetoric and delayed the first rate hike, although in early October
the Fed had indicated a rising likelihood of a December hike.

The major concern, a hard landing for the Chinese economy, no longer seemed to
be driving the markets. With hindsight, the August and September sell-off looks
like an exaggerated market move. However, we think it also shows that the bull
market has matured, and many market participants fear we could soon move into a
structural bear market. In the following, we discuss the likelihood of this
scenario.



We hope you enjoy our analysis.

Chinese hard landing fears banished

In October markets calmed noticeably and risky assets enjoyed a significant rebound. European and Japanese equity markets outperformed with the DAX rising 12.3%, the EuroStoxx50 10.2% and the Nikkei 225 9.7%. The S&P500 rose 8.3%, the Chinese Hang Seng index 8.6% and Emerging markets 7%.

European government bonds rallied on the back of a dovish ECB with 10Y Bund yields declining 7 basis points. Meanwhile US bonds sold off and 10Y Treasury yields rose 11 basis points.

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